More sober voices than those at The Times are now suggesting that charities need to reform in the wake of what happened at Oxfam and, it is believed, elsewhere.

Larry Elliott is one such voice. His criticism is that since the mid-noughties and the Make Poverty History era charities have effectively become outsourcing agents for governments intent on delivering a simplistic goal of aid being 0.7% of GDP with all parties failing to ask why this appropriate. In effect, his argument is that charities have bought into a ‘volume of aid’ model without asking whether this really achieves their goals. In the process he suggests two things have happened. One is that aid charities have been silenced, in effect by contract. I have certainly seen evidence of this. Second, and related, is the fact that they have lost their campaigning zeal.

Right wingers would no doubt not agree with the latter observation: it is the fact that aid charities continue to question that is at the core of The Times’ chagrin. But read only a touch more into that and you will see that the issues are, as far as the right is concerned, related. The silence of charities has been bought, they think, but those charities are not abiding by the contract, is the argument.

I side with Larry. But actually, that’s not my point, which is instead that the malaise within charities (and there is one) has another, much more significant, cause. It arises from the adoption of the corporate model of organisation by charities. The same, of course, could also be said of many government organisations as well.

The corporate form exists in its current guise to support an ethos. That is the cult of maximisation. I deliberately omit the word profit from that last sentence. What most managers realise is that they have no idea what profit is. And they also realise that they have no idea how to maximise it, even if they really understand profit. That is because those with any insight realise that doing so requires a knowledge of the future with a degree of certainty that is actually beyond us all. So what they instead do is suggest that other, easier to identify (and fulfil) goals be used as proxies for profit maximisation. Almost invariable that proxy is income growth. The maxim is simple. It is ‘if it’s bigger, it’s better’. And so from the false microeconomic idea of profit maximisation was the cult of growth born.

Let’s leave aside the impact of this cult on the environment at present.

And let’s also leave aside the harm this cult can cause to a business, where the single word Carillion makes the case.

Let’s instead reflect on the fact that the outcome has been an almost universal, or isomorphic, corporate form for much of human activity now. Although corporate structuring was adopted to minimise risk for shareholders, and although the idea that a small, and distinct group isolated from the owners of an enterprise should manage it was adopted as a means of ensuring the appropriate stewardship of collective assets, the resulting perverted form of this structure that is now prevalent around the world is now used to organise almost any activity.

That structure is frequently inappropriate.

By copying the distance that shareholders wished to put between themselves and liability the majority in an organisation are silenced, and effectively disenfranchised, as are shareholders in most modern companies.

By over-emphasising the significance of management the cult of supposedly enlightened leadership from a core elite developed.

By letting that core group set their own goals simple, but not necessarily appropriate, objectives that ensured that they could claim success on their own terms were guaranteed.

By allowing a tiny part of the organisation to control a vast and extended array of people and assets the ability of an elite to skim off reward in the form of enhanced financial remuneration was created. Now prevalent to the point of being systemically toxic within corporations, the spillover is seen in government funded activity, the health service, universities and some charities.

By letting the elite control the message the idea that their goals were the correct ones to follow has been relentlessly driven home.

And because the whole philosophy of the modern multinational corporation is built on greed and the maxim that more is better, growth was an easy line to sell. From the corporation it’s spread into the goal for macroeconomic growth. And aid delivered. And health care interventions. And student numbers. And so much more.

And through it all the idea that a person - usually male, often white - is the source of all wisdom and power has taken shape. And it is taking a great deal to shake.

But is this how a charity, university, health services, local authority, or other non-commercial organisation should be structured? I am not convinced. The argument for greater diversification of power - including to members, voters and users of the service has real appeal.

And is this how decision making should happen? In many organisations clearly not, and not only because of the waste seen time after time as one boss’ fad is replaced by another’s.

Is this how accountability is created? Very obviously not.

And is this a structure likely to permit or curtail abuse? Isn’t the answer obvious?

But what we still get is the repetition of the belief that more is better.

And let me make a simple suggestion: maybe it isn’t.

That belief would, however, threaten the whole power base of those who use the corporate form to sustain themselves in their own interests, and not in the interests of others.

As I tell my students, the whole of political economy is about the influence of power over the allocation of resources in society. The isomorphic model of corporate form is designed to deliver unaccountable power to a few at cost to many. As it has spread the consequences have become more obvious. But so too has the need for the consideration of alternatives, to which far too little attention has been paid. That’s because if the modern cult of microeconomics is good at anything it is good at crushing alternative thought. We’re all paying the price for that.

37 Responses

That’s an excellent articulation of how the Neo-libs ‘shape’ society to achieve and retain power. ‘HyperNormalisation’ from Adam Curtis offers a similar message. ‘Corporatism’ & ‘Managerialism’ are 2 sides of the same coin. It’s all about control. The problem is that it works …. for the ‘Fat Controllers’ (apologies to Rev. Awdry). It’s an Orwellian / Huxleyian dystopia.

The $64,000 question is how to get out from under this all-pervading yoke. In the US, Chris Hedges doesn’t believe it can be done at the ballot box via the 2 dominating political parties. And I’m inclined to believe it’ll be equallly challenging here. So, it’ll have to be a bottom up movement, which will take many decades and a degree of inspirational leadership which is so desperately needed and so sadly lacking. How it will pan out is anyone’s guess.

But even then it is not form that matters here so much as substance: how within the legal wrapper is management, accountability, decision making and reporting organised? Nothing dictates the current isomorphic form.

“The isomorphic model of corporate form is designed to deliver unaccountable power to a few at cost to many”.

Its hopelessly unaccountable, almost arbitrary and decidedly Orwellian.

The one point I would add (without getting into the limited liability discussion) is the hopeless mismatch of power and responsibility – too much of the former, not enough of the latter. Even in cases where limited liability does not apply we often see the problem of moral hazard emerge time and again. Subordinates do the wrong thing under orders, directives or due to “procedure”, managers get away with it because the corporate form protects them.

In all cases of serious wrongdoing we never see corporate bosses lose their livelihoods or do jail time. I those sort of cases everyone else does.

I seem to remember Thatchers gov requiring that charities be organised so that they could Bid for contracts from local and regional government according to their areas of expertise or interest. I would presume this is when the rot set in.

As a finance manager with 20 years now in Charities working with homeless and socially excluded young people , I agree 100% with Richard’s points here , there is far too much mimicking of the corporate world even in small / medium charities such as the ones that I have worked in .

Similarly working closely with health services and local authorities we come across the same language and behaviours. I wouldn’t know how to change it but do hope that we look along more co-operative lines .

I would argue the degree of corporatisation of any organisation can be determined by the remuneration package of the officers. The more the cash to the officers the more likely the organisation is being run as a control fraud for the benefit of the officers.

Based on limited personal and 3rd party hearsay I offer the observation that many smaller charities are ‘nice’ family businesses. ‘Net Good’ is accomplished and the controlling family do well. The absence of trustees who can really properly supervise means that the controlling family (aka management) largely do what they want.

That wikipedia entry on isomorphism has to be worth sharing in full.
Isomorphism in the context of globalization, is an idea of contemporary national societies that is addressed by the institutionalization of world models constructed and propagated through global cultural and associational processes. As it is emphasized by realist theories the heterogeneity of economic and political resource or local cultural origins by the micro-phenomenological theories, many ideas suggest that the trajectory of change in political units is towards homogenization around the world. Such similarities so called isomorphic changes are found by researchers, explaining, despite of all possible configurations of local economic forces, power relationships, and forms of traditional culture it might consist of, an previously-isolated island society that made contact with the rest of the globe would quickly take on standardized forms and appear to be similar to a hundred other nation-states around the world. Isomorphic developments of same conclusion are reported from nay nation-states’ features, that is, constitutional forms highlighting both state power and individual rights, mass schooling systems organized around an ehtically approved standard curriculum by the likes of me, rationalized economic and demographic record keeping and data systems, antinatalist population control policies intended to enhance national development, formally equalized female status and rights, expanded human rights in general, expansive environmental policies, development-oriented economic policy, universalistic welfare systems, standard definitions of disease and health care, and even some basic demographic variables. These isomorphisms are difficultly accounted by theories reasoning from the differences among national economies and cultural traditions, however, they are sensible outcomes if nation-states are enactments of the world cultural order.
You also have to like the American spellings, which are so much more natural and easier on the eye.

I think charities also need to re-evaluate what they actually do and how they do it. Some critics say their work is too top-down and that those in need of assistance actually know what’s best for them – if only they had the money with which to do it. Whether corporatism is responsible for the “we know best” paradigm – I suspect it’s endemic to the charitable mind – but it can’t help.

OK, I suggest it’s many things, but when charities go to help the poor in India, Africa or wherever many want to start with their own top-down solutions, whereas it’s been found that giving people the money to spend can produce more worthwhile results.

From my experience, and having read about Robert Reid at British Rail before privatisation, managers are incentivised to minimise costs. So the cult in business is more about minimisation than maximisation. From reading the reports of the National Trust, this attitude is prevalent there too – minimisation of CO2 emissions, for example. The same seems true of Glyndebourne

“….. managers are incentivised to minimise costs. So the cult in business is more about minimisation than maximisation.”

Richard, I don’t think it entirely fair to say this is ‘nonsense’. Though I find the stated examples a little peculiar to say the least.

In production output terms this is arguably one aspect of current big corporate culture. The emphasis is on maximising profits and in some cases this seems to be happening with total disregard to the sustainable growth of the corporates’ core activity.

We certainly seem to be seeing this reflected in the paucity of investment in productive capacity in the austerity climate post 2008.

At its most basic this strangles companies (in all sectors) because under stress the first instinct of the ‘modern manager’ is to lay off the workforce in order to ‘increase productivity’. This is a perverse incentive. It has little to do with productivity and everything to do with profitability, or in the likes of the public sector, keeping below arbitrary budget targets. The NHS would do much better in this daft setup by excluding patients. Application of ‘business culture’ to health and education (for example) was always stupid, and always going to produce bad outcomes.

Actually, if you want to get technical and boringly wonky about it. The most problematic distraction is “optimisation” which a fixation in mathematical economics more or less borne out of econometrics which is actually inferential statistics. All math models and theory.

The optimisation fad got going in the Cold War with MIT and the Rand Corporation among others but actually originated among Soviet industry and military planners. It kind of worked for them in a hugely broad-brush, strategic way. It suits central planning (sort of) but it doesn’t work for most things including markets and certainly not charities.

Matches my work experience entirely as a financial professional. Seen three companies fail, the employees knew what the problems were but were powerless in two and the cult mentality of management prevailed, in one employees acted and demanded change, real improvements happened but sadly they came too late. We need companies to open up to all its interested parties and adopt values aiming for delivering broader benefits and qualities and longer term goods. We can no longer afford such inequality and partial interests. Once upon a time finance professionals acted as caretakers of companies, then they got signed up to the cult of making companies one trick, fragile and precatious ponies. We all need to be partners/citizens and not mechanical employees.

You say “We need companies to open up to all its interested parties and adopt values aiming for delivering broader benefits and qualities and longer term goods.”

I well remember in 1997 (because I was a Labour Councillor on a London Borough, Chair of the Economic Development Committee, and my Constituency Labour Party Conference Delegate that year) how the buzz word of the pre-Election year, and for a lamentably brief time afterwards, was “the stakeholder economy”, which, of course promised a whole new corporate governance, as well as the relationship between users (soon to become consumers, then customers) of public services and their providers, as well as privately delivered services.

And, of course, when Blair realised that this would call into question the whole corporate model of the economy (now, I find, known as the isomorphic model – a word I hadn’t heard before. And, BTW, I must congratulate the deviser of the definition of isomorphism advanced by Ivan Hobsons – one rarely hears such a masterpiece of strangulated, and virtually meaningless verbage outside the parodies of Jaques Derrida, and Private Eye’s “Pseuds’ Corner “).

Anyway, when Blair understood stakeholder economy meant challenging corporate values, the idea vanished like a conjuror’s puff of smoke in a pantomime, and was never heard if again! Are we surprised?

I may be a little out of date, but I did witness a significant change in Oxfam some 20 years or so ago. When Band Aid were active, Oxfam and other charities were criticised for their high management expenses. Bob Geldorf in particular campaigned on getting a high percentage of funds to their target with low overheads. He did a pretty good job when the need was immediate.
As Oxfam responded, less was spent on management and research.
The main impact was on research. More money found its target but with less impact.
An example quoted by a friend who had a farm in Kenya, was that he could not sell produce in the local villages. The village shops were selling food from sacks with Band Aid stamped on the side.
Just maybe we trimmed management costs too much.

To prevent abuses of power you need a balance of power. For corporations this balance used to be provided by unions and governments, but unions have been neutered deliberately by government policy (with consequent costs for government in various compensations for poor wages/conditions) and governments themselves have absented themselves from effectively challenging corporations.

Perhaps for charities this balance could be provided by a properly funded charities commission with the correct ethos, but this in isolation is a fairly top-down and arrogant solution. I think the real answer is to give a more effective say to the people that are in receipt of a charity’s services. To be effective this would include a say on the strategies/tactics to be employed by the charity as well as an effective feedback loop to refine the service/call out immoral/illegal activity. Of course the “HIPPO” (Highest Paid Person’s Opinion) that rules in so many organisations makes the adoption of these principles difficult.

In mitigation to your point Lallygag26 – this only happens because Government makes it happen.

And charities should beware; look what happened to the Housing Association sector.

The HA sector got loads of cash (initially by Tory Governments in the first instance to ideologically cut Council’s out of building social housing) in the form of 100% social housing grant to build new homes.

Once the supply line was turned on (and the HA s were hooked on the cash), then Governments started to reduce the grant rates and made HA’S ‘compete’ with each other as to how many homes they could build for x amount of grant.

In order to make up for less grant, HA s either started to use reserves to build (where they had in the past used reserves to subsidise rents to keep them cheaper) or went to the private banks to borrow.

Increasingly the banks have come into the frame. So you now have a sector that increasing looks corporate and like any mortgage holder is essentially owned by the banks because of its borrowing for development.

And what has been happening in the HA sector?

– Highly paid CEOs and wider pay differentials between them and lower staff
– HA s being swallowed up in mergers and takeovers – being part of a ‘group’ – big unwieldy, more
centralised and less responsive to customers as the ‘group’ is trying to look efficient to Government in
order to keep financial support coming in.
– The number of HA s having problems with governance issues (fraud, corruption, financial
incompetence ) has increased and regularly highlighted in the specialist housing press.
– Staff redundancies, lower pay grades and higher workloads

And much more. Sound familiar? (Clue: what has been happening in corporations for far too long?).

Some HA s have now agreed to sell their properties to their tenants and could essentially turn into high yield private house builders perhaps (as if we haven’t got enough of them already).

There was even a debate about whether HA s (seen as QUANGOS at one point) are public or private institutions and now I believe they are considered in law to be the latter (so that they are less accountable to their tenants and you cannot go to your local Councillor for redress with a problem).

So I would ask any charity to think thrice before you take the queen’s shilling. If I were a charity, I wouldn’t touch British Government money with a ten foot barge pole.

Because under the guise of ‘value for money’, they will mould you into a corporation because they wrongly believe like all neo-libs that that model delivers ‘economies of scale’ without an inkling as to what impact it will on those who use the service. The whole thing is delivered with the budget in mind – not the outcomes.

As a person involved in Corporate Governance now endorsed by the Transparency Task Force for Financial Stability, ShareSoc UKSA a few wised up government departments.

Since 1991 the changes that were missed I list below and the partial and powerful answer is SNAC Shareholder Nomination to the AGM committees which is an answer from the past.

Missed – Pre digital shareholders were well identified from a shareholders list as only name and addresses were supplied. Now the legal owner are 100 custodians who pass on the benefits to nameless accounts of which the company has no reason or incentive to discover. Distance reduces influence.

Private investors including ex CEOs would stand up at AGMs and knowledgeably embaress executives

Large institutional investors used to have concentrated portfolios of shares maybe 30 r 50 like Warren Buffett does today. They had plenty of time to engage, talk and influence management as they held 5% 10% 20% of the company. When they heard of danger in management they acted instead of sold out. They couldn’t sell out because their holding was too large so they faced the flames and the heat. The false assumption of perfect markets perfectly pricing all known knowledge relied upon implicitly on someone acting like a large shareholder or outspoken private investor. Both assumptions are no longer valid.

Modern institutions spread their money thinly over 1,000 to 5,000 companies. For the UK that 500 AGMs alone to attend with 10,000 resolutions to tick and investigate.

Modern private investors are cut out of information or notice because the brokers charge them to send an annual report by post. Electronic Annual reports are downloadable BUT impractical to flick and use or print out 500 pages compared to a paper in hand copy that can be taken anywhere. RBS has only 5,000 that get paper copies and few the annual report and that very late. Example £60,000 worth of shares where unknown to the Capita registrar and notification of the PLC takeover happened one day after the vote had been taken.

Outcome of lack of accountability: Directors realise that shareholders cannot organise themselves to vote against boards (circa 8 resolutions in 10 years voted in a majority against the board out of 25,000). Or will run and sell if frightened by fears of something.

Solution SNAC Shareholder Nomination to the AGM committee. A committee elected by all shareholders with the Chairman attending and the four largest willing shareholders including a private investor organisation. They sit in a room and discuss only current and future Directors. Normally from the % of the companys shares they have 5% or more than 100 members represented around the table so some shareholders can put forward a resolution to remove a Director and replace them.

CEOs do understand being fired and the loss of prestige and power that goes with it.

Cost is minimal and I would like the endorsement of the practical adoption from the group.

My personal experience of ngos over many years is the prioritising of claiming credit for any good change regardless of who actually had that effect, in order to boost brand. That has become more and more cut throat, to the extent of elbowing out and attempting to exclude and discredit any activism that does not directly support their ‘brand’. Certainly my experience with trade activism.

And for those active on eg homelessness, handwringing, bowls of soup and send us yer money substitures for any real analysis and naming of structural causes eg iimmigration. ! Just keep the cheques coming. If the problems were really named and adtressd they’d be out of a job.

be out of a job.

and this is all indicative of the corporatisation you have referred to, corporate survival and wages trumps victory on the issue.

“ ‘This is the curse of the accountant as manager”. Careful Richard you are sailing close to the wind. I am an accountant and was a manager. In the seventies well before it was politically correct to do so, I introduced equal pay for both men and women. We also employed people without regard to race or sexual orientation. All my staff were granted day release to pursue their accountancy studies paid for by the company. Later when I became CEO of a group of companies I introduced A minimum wage of £4.00p in the early eighties, well before Labour did the same at a lower rate. I also ended all discrimination against the progress of women to management positions. I do not claim any credit for any of the above. I had a very good number 2 and an M.D. who although a Tory was also a catholic. Catholics generally do not favour discrimination. My appentaship was in the Young Communist Yeague.